When shopping for a home, a buyer has two options when it comes to securing a loan. To go with a mortgage broker or a direct lender. Some people don’t know the difference between the two and which one is the better option.
The largest difference is that a direct lender is the source of the loan and a mortgage broker is a middle man between the consumer and the direct lender. This is similar to buying a product wholesale versus retail. There are many advantages to securing a loan through a direct lender rather than a mortgage broker.
Let me explain:
1) Saving Time
Typically a direct lender has their own in-house processing and underwriting staff, which can save a consumer time. With a mortgage broker, the file will need to be sent out to a direct lender for at least underwriting if they have a processing staff. This can mean the difference between a few weeks and 45 days for an approval.
2) More Flexibility
Because mortgage brokers don’t have their own underwriting staff, they don’t have the ability to make decisions on their own. Also, they won’t have the ability to waive fees or certain documentation that a lender can. Many times a lender can be more flexible by offering discounts such as lender credit or waiving processing fees to help the consumer.
3) No Extra Steps
As mentioned before, a mortgage broker is a middle man, so they have to send a file to a lender for review which creates extra steps. By going with a direct lender, a consumer is going straight to the source of who reviews and approves the file.
4) Lower Fees
Whether you go with a direct lender or a mortgage broker, you will be charged fees for processing and origination. However with a mortgage broker, you will more than likely pay more since the direct lender will collect their fees and the broker will charge additional fees for their service; Otherwise mortgage brokers would go out of business.
Also, because a broker shops with many lenders, they may push for a particular program or lender that results in a higher payout for themselves. This can also mean a higher rate for the consumer.
Home Funding Corporation is a direct lender with over 25 years of experience. If you are ready to secure a loan for a purchase or refinance, get in contact with us today!